• Premium support proposal and critique: Objection 3, accountability

    This post is part of a series. If you haven’t read the prior posts in the series, you really should. The introduction explains what I’m doing and links to all posts to date.

    Another concern with premium support proposals, including the one I offered, is that private plans would be insufficiently held to account for their actions, quality, customer service, etc. The fear, as I understand it, is that private plans will not provide value, that when folks get really sick, the plans will do whatever it takes to not provide the care they need.

    I understand why people would worry about this. One of the ways a private plan can boost its bottom line is to shed high risk enrollees by treating them badly. Such a game of hot potato is clearly bad for the beneficiaries whose claims are denied or who experiences difficulty with the plan. Though I do not imply such plan behavior is excusable, it is nevertheless true that such behavior can lead to lower premiums. A claim denied is a claim unpaid. But, it begs a question, if plans do not care well for those who need coverage the most, what’s the coverage for? Low premiums may be appreciated, but of what value are they if, when push comes to shove, one cannot obtain the care one needs?

    Two questions come to mind about all this. First, how big a problem is it? I confess that I am not aware of the research on how plans treat higher cost enrollees. I am aware that there are many horror stories, but that’s not the same thing as research. I am certain some readers can point to good studies on Medicare plan quality (right?).

    Second, is traditional Medicare (TM) immune from such behavior? There is no explicit incentive, or even mechanism, for TM to put up barriers and deny claims. However, I wonder if that will change as TM begins to pay providers in more bundled fashions and provide greater incentives for lower costs. In the future, will TM beneficiaries be immune from accountability and quality problems normally associated with private plans? Will providers, acting on TM’s incentives, provide all the care that the sickest beneficiaries need?

    It probably occurs to everyone that there are ways to measure plan quality and to provide incentives for good scores. This is already being done for Medicare Advantage (MA) plans. I’m certain whatever is being measured is not complete and many elements of quality remain unobserved and without incentives. Note that TM is not required to report quality metrics and demonstrate adequate provider access as MA plans must. Thus, it is unclear how quality compares between MA and TM.

    Finally, the quality issues I’ve suggested in this post are related to risk selection. Providing poor quality to high cost enrollees is one way to achieve more favorable selection. Thus, greater attention to adequate risk adjustment and the monitoring of risk selection may address some quality issues. In some sense, if you want plans to attract and treat high cost beneficiaries well, you just have to pay them more for enrolling such beneficiaries. At some level of payment, plans should want to provide the highest risk beneficiaries with the highest quality. Put simply, sometimes you get what you pay for.


    • Here in Switzerland it is easy (maybe too easy) to change plans once each year. Organizations poll beneficiaries about perceived quality of the customer experience, and publish the results widely, especially during the open enrollment period.

      If a plan is aggressive about denying claims, or pays bills late, or has opaque billing statements, these facts quickly become known, and people vote with their feet. Since insurers are selected by individuals and not by companies, this phenomenon includes virtually the entire population.

      I sometimes think it is too easy to change plans. Some customers change plans every year, chasing the lowest possible premium (with decent quality). Such frequent changes have to add to administrative costs, and a period of bad luck with claims experience can put smaller insurers into a financial crunch.

      • David
        This just released from Cochrance, of interest and pertinence.

        At least in the Netherlands, I am struck by lack of plan switching depsite attempts at engaging public; I have seen this mentioned in many reviews–and found this citation as well (granted its not Switzerland, but a system akin in spirit):

        Not to invoke needless paternalism, but historically, folks emphasize cost over quality and overlook report cards–a market failure, at least in US, and opens the door for greater regulatory oversight. Plan malfeasance and gamesmanship requires much of what Austin alludes to above. It wont percolate down to the beneficiary.


        • Yes, and this is a reminder that cultural differences really do matter. While it is wise to look at other nations for ideas on what works and what doesn’t, one can’t simply take over a program from a different culture and assume it will work in the same way.